CARACAS, Venezuela—President Nicolás Maduro’s government declared a 60-day nationwide economic emergency Friday as his embattled administration tries to tackle a deepening economic crisis and undermine the opposition’s new majority in the National Assembly.

 

The announcement was made hours before Mr. Maduro delivered a much-anticipated state of the union address, where he promised to continue his statist economic model in the face of hardships that he blamed on lower oil revenues and capitalist speculation. But Mr. Maduro acknowledged the need for some changes, including raising domestic fuel prices for the first time in two decades.

 

The oil-rich nation’s crunch became even more apparent Friday as the central bank released key data for the first time since December 2014. It reported the economy contracted 7.1% and annual inflation hit 141.5% through September, the world’s highest.

 

“We want to reaffirm the people’s trust in the revolutionary government,” Mr. Maduro’s top economic adviser, Luis Salas, said in a televised address from the presidential palace as he read the emergency decree.

 

The decree didn’t detail specific measures, but it gave the executive branch sweeping control over the national budget to finance and implement policies to stimulate the economy as Mr. Maduro sees fit.

 

The order, which can be extended for another 60 days, also calls for businesses to increase domestic production of basic goods and seeks greater control of distribution networks, although it offers no details on how businesses starved of dollars to buy much-needed imports will be able to do so.

 

Members of the opposition Democratic Unity coalition, which won a majority in the National Assembly in landmark midterm elections last month, said the decree will be vetted over the next week by lawmakers, who will be able to approve or reject it.

 

For his annual address, Mr. Maduro for the first time faced an opposition legislature that wants to reverse policies adopted during 17 years of Socialist Party rule, first under the president’s mentor and predecessor, Hugo Chávez.

In a glaring difference from previous speeches, Mr. Maduro’s three-hour address was followed by a half-hour rebuttal by assembly leader Henry Ramos, a prominent opposition politician. Mr. Ramos said the country’s problems were the result of government mismanagement, rather than the so-called economic war that Mr. Maduro says is being waged by the enemies of his leftist administration.

 

But Mr. Ramos also called for dialogue in the politically polarized nation to tackle the economic turmoil, which is marked by chronic food shortages. “It’s a crisis that is getting worse by the day and one that affects us all,” Mr. Ramos said. “If we can find points in common to get out this mess, we won’t be the ones denying a resolution of these problems.”

 

The decree is the first move carried out by a new cabinet Mr. Maduro appointed on Jan. 6. The most visible appointment he made was Mr. Salas, a leftist sociologist who in his writings has denied the existence of inflation and who blames Venezuela’s problems on greedy capitalists.

 

Mr. Salas’s appointment has raised concerns that the president is doubling down on populist, state-led policies that economists say have made Venezuela heavily dependent on imports it can no longer afford, as the country’s heavy oil sells for $24 a barrel, compared with $90 in 2014.

 

In his statement, Mr. Salas echoed Mr. Maduro’s “economic war” allegations and said the emergency decree was necessary to tackle “induced inflation,” sabotage and illegal speculation that has prompted a free fall of the local currency, the bolivar, on the black market.

 

“There’s nothing new here,” said Henkel Garcia, director of the Caracas business consultancy Econometrica. “When you read the little that the decree details, you see that it’s a continuation of the same line the government always uses.”

 

“It means the government doesn’t have the slightest interest in rectifying things, and it means more deterioration for everyday life and more social pressure and conflict,” Mr. Garcia said.

 

Venezuela has a long list of needed overhauls to jump-start the economy, analysts say. In addition to slashing a generous subsidy that makes gasoline almost free, Venezuela needs to ease stringent currency controls that restrict access to U.S. dollars and to relax rigid price caps on staples like cooking oil and detergent that deter domestic production, analysts say.

 

But those measures are likely to further exacerbate inflation in the near term and hit Mr. Maduro hard at a time when polls show him grappling with low approval ratings.

 

A 12-page report posted on the central bank’s website Friday explained the urgency in taking economic measures.

 

The central bank said inflation was most felt in basics like food, liquor, hotels and education services. Construction activity contracted 20% in the 12 months ended September. Low oil prices left Venezuela with a current-account deficit of $13 billion through September, compared with an $8.4 billion surplus in 2014.

 

“The figures confirm a dire macroeconomic backdrop,” said Goldman Sachs analyst Mauro Roca. “Under these conditions, the administration will find it increasingly difficult to continue servicing its external debt.”

 

The International Monetary Fund estimates Venezuela’s economy shrank by as much as 10% in 2015 with inflation near 200%.

 

The central bank’s report didn’t include the once closely tracked scarcity index which, until it stopped appearing in January 2014, measured shortages of essential goods. Instead, the central bank offered a different figure: 87% of the country believes that speculative hoarding is taking place, an explanation the government gives for the shortages of basic goods.

 

“It’s a new indicator,” central bank President Nelson Merentes said on the sidelines of the National Assembly after he was asked to explain the data. “It’s different,” he said.

 

The Wall Street Journal